Empresas Noroeste, Inc., In re, 86-1355

• Citation: 806 F.2d 315
• Decision Date: 04 December 1986
• Docket Number: No. 86-1355,86-1355
• Parties: , Bankr. L. Rep. P 71,524 In re EMPRESAS NOROESTE, INC., Debtor. Hans Lopez STUBBE, Trustee, etc., Plaintiff, Appellee, v. BANCO CENTRAL CORPORATION, Formerly Known as Banco Central Y Economias, Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 315

806 F.2d 315

15 Bankr.Ct.Dec. 742, Bankr. L. Rep. P 71,524

In re EMPRESAS NOROESTE, INC., Debtor Hans Lopez STUBBE, Trustee, etc., Plaintiff, Appellee, v. BANCO CENTRAL CORPORATION, Formerly Known as Banco Central Y Economias, Defendant, Appellant.

No. 86-1355.

United States Court of Appeals First Circuit.

Argued Nov. 3, 1986.

Decided Dec. 4, 1986.

Jose R. Gonzalez-Irizarry, with whom Ramon Coto-Ojeda and McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria, Hato Rey, P.R., were on brief, for appellant.

Sergio A. Ramirez De Arellano, San Juan, P.R., for appellee.

Before CAMPBELL, Chief Judge, TIMBERS, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

LEVIN H. CAMPBELL, Chief Judge.

Banco Central Corporation appeals from the district court's order affirming the bankruptcy court's refusal to dismiss an action brought by the trustee contesting Banco's claim to be a secured creditor. As we lack appellate jurisdiction, we dismiss the appeal.

Before Empresas Noroeste, Inc. went into bankruptcy, Banco loaned it money secured, or so Banco thought, by a mortgage on the debtor's real estate. Because of recording problems, the trustee in bankruptcy would not recognize the mortgage, and Banco brought an action to have the status of its lien determined. This action had not been decided when, two years later, the trustee sold the real estate in question at auction. The sole bidder, and the purchaser, was Banco. Confirming the sale, the bankruptcy court allowed Banco to offset the amount it was owed by the debtor against the purchase price, thus treating Banco, at that time, as a secured creditor. However, the bankruptcy court also indicated its awareness that the trustee was contesting Banco's secured status. The trustee insists, and the bankruptcy court itself later ruled, that confirmation of the sale was meant to be without prejudice to subsequent resolution of the dispute concerning recognition of Banco's mortgage. Under this view, if the mortgage were later held invalid, Banco would be required to settle up with the estate in cash for the purchase price of the real estate against which it had been earlier allowed to offset its asserted lien.

Banco sharply disputed the trustee's position that the validity of its mortgage remained open to challenge after the sale. It insisted that once the bankruptcy court confirmed the sale of the real estate to it on terms which permitted offset of the mortgage--an action from which the trustee never appealed--all question as to Banco's secured status was resolved in Banco's favor.

After confirmation of the sale, Banco withdrew its suit to determine the status of its lien. Thereupon, the trustee brought the present action, asking the court to set aside Banco's mortgage as a preferential transfer under 11 U.S.C. Secs. 544(a), 547, 549 (1982). Banco responded by moving to dismiss the complaint on various grounds including that it was a collateral attack upon the order confirming the sale, and was barred by res judicata.

The bankruptcy court denied Banco's motion to dismiss the trustee's action. In stating its reasons for doing so, the court said that the trustee could object to a claim at any time before final liquidation of the estate so long as the creditor had not been prejudiced by the trustee's failure to have acted earlier. The court said, "where as here the creditor purchased with full knowledge its secured status was being questioned, [it] cannot claim prejudice."

The district court affirmed the bankruptcy court's refusal to dismiss the trustee's action seeking to invalidate Banco's purported lien. Banco now appeals from this order of the district court.

We hold that we have no jurisdiction to entertain this appeal because the bankruptcy court's order denying the motion to dismiss was not "final" within the meaning of 28 U.S.C. Sec. 158(d) (1982). Only "if the underlying bankruptcy order appealed from was itself final" would we have jurisdiction over this appeal. In re American Colonial Broadcasting Corp., 758 F.2d 794, 800 (1st Cir.1985). The special considerations bankruptcy proceedings deserve in terms of determining the finality of their orders are not here present. In re Saco Local Development Corp., 711 F.2d 441, 444 (1st Cir.1983); In re American Colonial Broadcasting Corp., 758 F.2d at 801. This is not a case that presents a "discrete dispute within the larger case" of a bankruptcy proceeding, but is simply an appeal from an interlocutory order within what may be such a discrete dispute (i.e., the dispute whether Banco is a secured creditor). An order denying a motion to dismiss, such as that before us, is a common example of what is normally a non-appealable interlocutory order. Catlin v. United States, 324 U.S. 229, 236, 65 S.Ct. 631, 635, 89 L.Ed. 911 (1945); Fano v. Meachum, 520 F.2d 374, 377 n. 4 (1st Cir.1975); Save the Bay, Inc. v. United States Army, 639 F.2d 1100, 1102-03 (5th Cir.1981); Texaco, Inc. v. Cottage Hill Operating Co., 709 F.2d 452, 453 (7th Cir.1983). See also Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373-74, 101 S.Ct. 669, 673-74, 66 L.Ed.2d 571 (1981). Denial of Banco's motion...